Employee timekeeping: The do’s and don’ts
No one said that employee timekeeping was fun. Just necessary.
In fact, the Fair Labor Standards Act (FLSA) has clearly established the rules for employers when it comes to employee hours, wages, and overtime.
Employee timekeeping seems like a straightforward process. But it can easily become highly complex when an employee clock in early or leaves late, has to travel for business, and so on.
We dive into a few do’s and don’ts so that you can efficiently manage your timekeeping responsibilities.
The Do’s: Employee Timekeeping
1. Use An Efficient Timekeeping Method
The FLSA does not say what method of employe timekeeping you must adhere to, but it requires managers to keep accurate time records for every non-exempt employee.
For example, these records must cover hours worked per day, the exact clock in and out times, breaks, overtime (if any), wages paid, and anything else about the employee’s employment. If a manager, or business owner, does not comply with the FLSA time tracking requirements, they will incur heavy fines and additional penalties.
You must have an efficient system to record this data.
However, manual timekeeping is an outdated method that is open to countless errors in today’s day and age. Therefore, many managers and business owners – especially at a federal level – are turning to an employee time tracking app.
With that in mind, there are countless benefits to implementing a time clock solution, especially if you have a large workforce, have employees working multiple shifts, and have a deskless workforce.
- A record of all employee timesheets
- A more efficient payroll process
- The smaller margin for potential bookkeeping errors
- Employees have more ownership and accountability over their work, hours, and schedules.
- Data helps employers build out a strategic direction for the company when it’s clear how time is spent and what the total payroll numbers are
- Check team and individual attendance in real-time
- Curb buddy punching with GPS timestamps
- Curb employee time theft
- A greater level of transparency for your clients – and your employees
- Easier to manage overtime before it strikes
- Happier, more productive employees when their paychecks are accurate and paid on time without the back and forth
An employee time tracking app can, and will, save you time and money. Plus, it keeps you compliant with FLSA regulations.
2. Reduce Payroll Miscalculation
You have a digital and clear overall of how many hours each employee worked per period through an employee time tracking app. (And you can review this in groups when and if necessary).
This record of hours helps you to avoid payroll errors as you have a GPS timestamp per clock in and clock out action per employee. Just thinking of it like this – paper timesheets and punchcards are very fragile and even perishable. It’s a huge liability for your company! For example, these paper versions can be lost, swapped, altered manually without a record of changes made, destroyed, or misplaced. So, if you have to tend with a payroll miscalculation, having a digital record is far more accurate and reliable.
3. Reduce Overtime Miscalculation
You must calculate overtime wages correctly, and overtime is not the same as regular wages. If you don’t calculate overtime correctly, you will owe wages, penalties, and interest.
The FLSA requires you to pay your employees 1.5 times their regular rate of pay, or essentially time and a half, for any time worked past 40 hours in a workweek.
For example, an employee regularly paid $10 per hour should be paid $15 per hour for overtime.
Note that most states and cities have different overtime wage laws, so be sure to study if you must follow the more stringent rules.
4. Pay The Correct Tax Rate
Tax rates are always changing, so the rate you first applied to pay your employees may be inaccurate now. You must make it up in taxes, penalties, and interest if you pay the wrong rate.
Regularly, ensure that you check your employment tax rates as most tax rates are updated each year. For example:
- Federal income tax
- Social Security tax
- Medicare tax
- Federal unemployment tax
- State income tax
- State unemployment insurance tax
- Local income tax
Additionally, check your state – at a local level – on any additional taxes you may be required to pay.
The Dont’s: Employee Timekeeping
1. Don’t Miss Deadlines for Payment
Employers must pay for every single hour that is completed by their employee(s). Even if there was a discrepancy over the pay, the employee must receive full payment regardless.
And yes, even if your employee forgot to hand in their timesheet, they are still required to receive payment.
2. Don’t Misclasify Employees
Suppose you employ a mix of employees in terms of the pay period, like independent contractors, full-time employees, part-time employees, and so on. However, if you misclassify your staff, you are required to pay the employee and employer’s share of taxes, plus all penalties and interest.
Additionally, you may owe back wages to the employee.
Refer to the U.S. Department of Labor’s six-part economic realities test to know how to classify employees.
And if it still isn’t clear, file a Form SS-8 to avoid misclassification as you are requesting the IRS to determine the worker’s status.
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3. Don’t Allow Employees to Work Off the Clock
Employers are not allowed to have their non-exempt employees work “off-the-clock.” Therefore, you must create a work policy that clearly and directly prohibits off-the-clock work. Have protocols in place to help prevent it.
The Bottom Line On Timekeeping
Be sure to create clear policies and procedures to ensure you have access to accurate timesheets, process payroll accurately, and protect your company from lawsuits or hefty fines.
